United States v. Gbotcho

United States District Court, D. Maryland

April 27, 2015

UNITED STATES OF AMERICA,v.KOMI E. GBOTCHO

MEMORANDUM OPINION

DEBORAH K. CHASANOW, District Judge.

Presently pending and ready for resolution in this tax case are: (1) a motion for preliminary injunction filed by Plaintiff United States of America ("the Government") (ECF No. 2); and (2) motion for default judgment filed by the Government seeking a permanent injunction against Defendant (ECF No. 7). The court now rules, no hearing being deemed necessary. Local Rule 105.6. For the following reasons, the motion for a preliminary injunction will be denied as moot. The motion for default judgment will be granted and a permanent injunction will be entered.

I. Background

The Government filed the instant complaint on February 3, 2015, seeking a permanent injunction pursuant to 26 U.S.C. §§ 7407, 7408, and 7402, prohibiting Defendant Komi E. Gbotcho ("Mr. Gbotcho" or "Defendant") from preparing income tax returns for others. (ECF No. 1). On the same day, the Government moved for a preliminary injunction. (ECF No. 2). Service of process was effected on February 4, 2015. (ECF No. 4). When Defendant failed to respond within the requisite time period, the Government moved for entry of default. (ECF No. 5). The clerk entered default on March 12, 2015 (ECF No. 6). The Government filed the pending motion for default judgment on March 20, 2015. (ECF No. 7). To date, Defendant has taken no action in the case.[1]

In accordance with Fed.R.Civ.P. 65, the court makes the following findings of fact and conclusions of law.

A. Findings of Fact

Taking the allegations in the complaint as true, the court finds as follows. Komi E. Gbotcho has operated a tax return preparation business under various names, such as Eplatet, Eplanet LLP, Eplanet Corp., and Eplanete Corp. (ECF No. 1 ¶ 4). The Internal Revenue Service ("IRS") estimates that for tax years 2010 through 2013, Defendant prepared and/or filed at least 1, 309 tax returns through his business(es). (Id. ¶ 5).

The IRS investigated tax returns filed by Mr. Gbotcho and his businesses from 2009 to 2013. During the audit, "50 tax returns were examined, and adjustments were made to 48 of those tax returns, for an adjustment rate of 96%, and an average adjustment of $5, 063 for each tax return." (Id. ¶ 7). The IRS assessed penalties against Defendant in the amount of $223, 500 as a result of the audit. (Id. ¶ 8). The IRS opened a second investigation of Defendant for tax year 2013, which is ongoing. (Id. ¶ 9).

Mr. Gbotcho continually prepared and submitted tax returns for individuals claiming certain personal property rental deductions, business expense deductions, and home improvement deductions. With respect to personal property rental deductions, at least two customers for whom Mr. Gbotcho prepared tax returns indicated during the IRS's audit that they had no rental property, yet Defendant claimed in their tax returns a personal property deduction in the amount of $12, 856. (Id. ¶ 12). One customer stated that he only provided his Form W-2 to Defendant for his tax return to be prepared. The customer also told the examiner that he had been referred to Mr. Gbotcho because of his reputation for being able to get larger refunds for his customers than other tax preparers. (Id. ). In another instance, Mr. Gbotcho prepared 2009 and 2010 tax returns for a customer claiming personal property rental deductions in the amount of $24, 723 and $28, 748, respectively, but the customer told the IRS that he had no rental property and did not know why the deduction was claimed on his tax returns. (Id. ¶ 14). For the 2013 tax year, Defendant claimed a personal property rental deduction in the amount of $9, 850 on twelve out of thirty returns selected for an audit. (Id. ¶ 15).

As for business expense deductions, for one customer, Defendant claimed a deduction in the amount of $12, 240 for employee business expenses on the 2009 tax returns and $14, 834 for 2010. (Id. ¶ 17). The customer indicated that she told Mr. Gbotcho that she had to buy suits for work and drive to work, and that he "grossly inflated the amounts of those expenses." (Id. ). On another customer's 2010 tax return, Mr. Gbotcho claimed a deduction for employee business expenses in the amount of $16, 914, yet the customer stated during the audit that he had no unreimbursed employee expenses and the deduction was claimed for commuting expenses. (Id. ¶ 18).

Mr. Gbotcho also claimed deductions for "home improvement" expenses on his clients' tax returns. Specifically, on one customer's 2013 tax return, Mr. Gbotcho claimed a deduction in the amount of $9, 850 for home improvement; the customer said that he spent that amount to renovate a bathroom in his home. (Id. ¶ 20). In another instance, Mr. Gbotcho claimed a deduction in the amount of $18, 285 on a customer's 2009 tax return, and the customer told the IRS that the deduction was for repairs that he made to his home, such as fixing stairs and building a patio. (Id. ¶ 21).

II. Conclusions of Law

A. Standard of Review on Default Judgment

Under Fed.R.Civ.P. 55(a), "[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default." A defendant's default does not automatically entitle the plaintiff to entry of a default judgment; rather, that decision is left to the discretion of the court. See Lewis v. Lynn , 236 F.3d 766, 767 (5th Cir. 2001). The Fourth Circuit has a "strong policy" that "cases be decided on their merits, " Dow v. Jones , 232 F.Supp.2d 491, 494 (D.Md. 2002) ( citing United States v. Shaffer Equip. Co. , 11 F.3d 450, 453 (4th Cir. 1993)), but default judgment may ...

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